Along a straight-line demand curve, why does the price elasticity of demand grow steadily smaller as we move from left to right?
What will be an ideal response?
As we move from left to right, the quantity keeps getting larger, so that a given numerical change in quantity becomes an ever-smaller percentage change. But, simultaneously, the price keeps going lower, so that a given numerical change in price becomes an ever-larger percentage change. So, as one moves from left to right along the demand curve, the numerator of the elasticity fraction keeps falling and the denominator keeps growing larger; thus the fraction that is the elasticity formula keeps declining.
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Gains from trade
A) result in being able to consume beyond the trading individuals' production possibilities frontiers. B) occur when one party to the trade has an absolute advantage in both goods. C) occur when people do not specialize. D) occur when opportunity costs are equal. E) always benefit one party but not the other party of any trade.
The decision rule for a profit-maximizing firm operating in a competitive market to hire an additional worker is the value of the:
A) marginal product of the worker should be equal to or greater than the wage rate. B) marginal product of the worker should be equal to or lower than the wage rate. C) average product of the worker being hired should be equal to the wage rate. D) average product of the worker being hired should be lower than the wage rate.